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World – ManpowerGroup cuts costs as revenue declines in all major markets

22 April 2013

The world’s third-largest recruiter ManpowerGroup (MAN:NYSE) reported a sharp drop in quarterly profits on Friday as business continued to slow in Europe where the firm derives the majority of its sales.

In the three months to March, revenue slipped -6% (in constant currency) to $4.76 billion while gross profit was down -6% to $790.1 million. Operating profit plummeted by a sharp -41% to $54.4 million. The company reported first-quarter net earnings of $23.9 million, down -39% from the prior year.

Nevertheless, to counterbalance weak demand, ManpowerGroup impressed investors by aggressively controlling costs. SG&A as a percentage of revenue improved 10 basis points to 14.7% of revenues. The company announced that it has realized circa $50 million of sustainable year on year SG&A savings on the way to its 2013 target of $80 million. But office consolidations and severances came with a hefty restructuring charge in the quarter of $34.8 million (or $25.3 million after tax).

ManpowerGroup CEO, Jeffrey A. Joerres, said “our recalibration of our cost base is advancing ahead of schedule. Those efforts, which are focused on simplifying our business, were initially rolled out in the fourth quarter of 2012 and continued into the first quarter, resulting in the restructuring charge in the quarter.”

Gross margins remained flat following a slight contraction last quarter and management guided that second quarter gross margins should actually be up, helped by pricing discipline and a windfall in the shape of French payroll tax credits.

ManpowerGroup continued to see high levels of uncertainty in Europe.  In France, the company’s largest single market, revenue fell -12% (in constant currency) to $1.14 billion. In Italy, revenue dropped -4% to $257.9 million while Spain declined by -18%. Total revenue in Southern Europe was $1.59 billion, a decline of -10% from a year ago.

Staffing markets also contracted in Northern Europe, where ManpowerGroup’s operations cover countries such as Germany (-10%), the Netherlands (-11%) and the Nordics (-9%). Total revenue in this region fell -6% (in constant currency) to $1.37 billion.

While staffing firms have seen some brighter prospects in North America compared to other major staffing markets, ManpowerGroup posted a -4% decline in US sales which totalled $706.1 million. Total revenue for the wider Americas region was $1.09 billion, dropping by -3% (in constant currency).

Even in the fast-growing Asia Pacific and Middle Eastern (‘APME’) economies, the business came under pressure with revenue falling by just over -1% (in constant currency) to $632.5 million. Within the APME region, Japan is ManpowerGroup’s largest country, representing 38% of the region’s revenues. Japan’s first quarter revenues declined by -5% in constant currency. The Australian business also declined -9% in constant currency.

Looking at the year ahead, Jeff Joeress commented, “We remain cautiously optimistic that we will see some slight improvements as we go through the year, but at this time, we have not really experienced that.”

The US-based recruiter reported its quarterly results in the early hours of Friday morning in local time and late in the day for Europe. The stock market reacted positively to the news as analysts had feared the results would be even weaker. In early trading on Friday, the firm’s share price jumped by +8% to $55.51, up +27% from a year ago. Based on its stock price, ManpowerGroup has a market value of $3.96 billion. 


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